United Global Telecoms Fund · telecom stocks, traditionally bought for their dividends, relatively...

United Global Telecoms FundAnnual Report

for the financial year ended31st December 2018

MANAGERUOB Asset Management LtdRegistered Address:80 Raffles PlaceUOB PlazaSingapore 048624Company Registration No. : 198600120ZTel: 1800 22 22 228

DIRECTORS OF UOB ASSET MANAGEMENTLee Wai FaiEric Tham Kah JinPeh Kian HengThio Boon Kiat

TRUSTEEState Street Trust (SG) Limited168 Robinson Road#33-01, Capital TowerSingapore 068912

CUSTODIAN / ADMINISTRATOR / REGISTRARState Street Bank and Trust Company, acting through its Singapore Branch168 Robinson Road#33-01, Capital TowerSingapore 068912

AUDITORPricewaterhouseCoopers LLP7 Straits View, Marina OneEast Tower, Level 12Singapore 018936

United Global Telecoms Fund(Constituted under a Trust Deed in the Republic of Singapore)

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A) Fund Performance

Fund Performance/Benchmark Returns

3 mth%

Growth

6 mth%

Growth

1 yr%

Growth

3 yrAnn

CompRet

5 yrAnn

CompRet

10 yrAnn

CompRet

SinceInception

16 August1999Ann

CompRet

United Global Telecoms Fund -7.06 -1.98 -9.45 -2.19 0.02 2.73 -0.61Benchmark -6.44 -1.67 -9.14 -1.07 0.89 4.66 -0.47

Source: Morningstar.

Note: The performance returns of the Fund are in Singapore Dollar based on a NAV-to-NAV basis with dividends and distributionsreinvested, if any.The benchmark of the Fund: MSCI ACWI Telecoms.

For the twelve months ended 31 December 2018, the net asset value of the Fund declined 9.45%,compared to a decline of 9.14% for the benchmark MSCI ACWI Telecoms (in Singapore Dollar terms).

The Fund underperformed its benchmark due to our overweight exposures in Japan. This was partlyoffset by the drag from our stock picks in Asia Pacific and Europe.

The top contributors to the Fund’s performance included Verizon Communications Inc., BroadcomInc. and Elisa Oyj. Key detractors were AT&T Inc., Vodafone Group Plc and Softbank Group Corp.

As at 31 December 2018, the Fund had the following country allocation: United States (40.01%), Japan(9.75%), Taiwan (6.18%), Germany (6.07%), France (5.36%), Hong Kong (5.29%), Spain (4.35%),United Kingdom (4.03%), Others (17.29%) and Cash (1.67%).

In terms of sub-sector allocation, the Fund had the following allocation: 87.23% in CommunicationServices, 11.10% in Information Technology and 1.67% in Cash.

Economic and Market Review

The global Telecommunication Services sector declined by more than 9.00% compared to the 7.49%drop in the MSCI All Country World Index, both in Singapore Dollar terms in 2018. We believe thelacklustre performance relative to the broader market is largely due to rising interest rates, which madetelecom stocks, traditionally bought for their dividends, relatively less attractive. The yield for 10-year USTreasuries rose from 2.41% at the end of 2017 to a recent peak of 3.26% in early October, before settlingat 2.68% at the end of the year. To add salt to the wound, the sector suffered further alongside globalequities as investor risk appetite waned in the last quarter of 2018 due to concerns over slowing globalgrowth, the US-China trade conflict and an overly-hawkish US Federal Reserve (Fed) which hiked interestrates four times during the year.

From a regional point of view, US carriers unseated their Japanese counterparts as the relative bestperformers for the full year, with Asia Pacific ex-Japan and European carriers trailing much furtherbehind.


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A) Fund Performance (continued)

US wireless operators fell less than the overall market, given that these companies had already sold offlast year on the back of stiff competition in offering unlimited data by the incumbents. Meanwhile, industrymergers helped boost the sector this year, as investors looked to wider offerings from telcos and lesscompetition. Mergers announced in the first six months include T-Mobile and Sprint, as well as AT&Tand Time Warner. Cable operators underperformed with the decline in their subscriber numbers, asconsumer habits changed in favour of streaming content over the internet – such as YouTube and Netflix– instead of traditional cable TV.

Japan wireless carriers experienced a reversal of year-to-date outperformance and corrected more thanthe wider Japanese market in October as investors stepped away in an increasingly “risk-off”environment. The sector plunged sharply further into the red when NTT Docomo announced cuts tomobile rates by 20 to 40% in the first quarter of the new financial year, that was likely to compress profitmargins for the entire industry. The group tried to stage a comeback in November but the attempt wasfutile as the sector ended the year with a decline of 6.55%.

Elsewhere in Asia Pacific, total returns of the operators were mixed. India operators plunged as stiffcompetition, heavy capital expenditures (capex) and rising interest rates led to declining profits.Operators in Australia also struggled, as they face pressure to cut costs on the back of stagnantrevenue. Meanwhile, operators in Taiwan performed better as investors rotated out of Technology sectoramidst fears of a global trade war to more defensive sectors.

European operators suffered the most through 2018. European equities underperformed amidst there-emergence of fears of an European Union break-up (EU) after the election in Italy produced ananti-EU coalition. The weaker Euro as a result of the uncertainty was a further drag on stockperformance. UK turned out to be the worst performing market within the European region for the full yearas the “merger and acquisition” premium, which was applied to the companies within the group sinceComcast announced its intention to bid for Sky Plc, dissipated amidst the more and more chaotic Brexitdeadline.

Outlook and Fund Strategy

The continued uptrend in global interest rates will likely be a headwind for telco stocks, which have somebond-like properties, although any equity market volatility may lead to some rotation into the sector inselective countries. The recent new inclusion of internet and social media companies as well as sometechnology ones into the telco group to form a rejuvenated Communication Services sector by indexprovider MSCI may also help to diversify the concentrated risk exposures that the existing index has to thetraditional high-dividend paying telco companies.

Given the changes of the benchmark constituents and their risk weightings, the Fund is currentlyoverweight in Europe, Asia Pacific and Japan, funded by an underweight in the US.

The US competitive pressure in the mobile market would likely ease after the industry consolidation, andwe do not expect the fight for market share in unlimited data to intensify. However, the introduction of 5Gnetwork infrastructure would require telcos to intensify their capital expenditure investments. As such, welook to shift and increase our risk allocation to other industries within the market that may provide higherreturns on capital opportunistically.


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A) Fund Performance (continued)

While we look forward to favourable moments to peel back our exposures to the other regions, the Fundis likely to maintain a significant risk exposure to Europe, which we believe has been over-penalised giventhe stable interest rate environment in the region. As for the other markets, we seek to balance out highergrowth and return investment opportunities with high quality and stable income providers such asTelecommunication Services companies.

We will maintain a focus on high quality firms with strong franchises. Our investment targets arecompanies with superior networks, economies of scale, or differentiated technologies.


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B) Investments at fair value and as a percentage of net asset value (“NAV”) as at 31 December2018 under review classified by

i) Country

Fair Value(S$)

% of NAV

Canada 433,630 3.36Finland 393,517 3.05France 690,567 5.36Germany 782,793 6.07Hong Kong 682,114 5.29Indonesia 417,822 3.24Japan 1,256,813 9.75Mexico 211,708 1.64Norway 370,962 2.88Singapore 402,875 3.12Spain 561,458 4.35Taiwan 797,291 6.18United Kingdom 519,855 4.03United States 5,160,474 40.01Portfolio of investments 12,681,879 98.33Other net assets/(liabilities) 215,148 1.67Total 12,897,027 100.00

ii) Industry

Fair Value(S$)

% of NAV

Communication Services 11,250,053 87.23Information Technology 1,431,826 11.10Portfolio of investments 12,681,879 98.33Other net assets/(liabilities) 215,148 1.67Total 12,897,027 100.00


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B) Investments at fair value and as a percentage of net asset value (“NAV”) as at 31 December2018 under review classified by (continued)

iii) Asset Class

Fair Value(S$) % of NAV

Quoted equities 12,681,879 98.33Other net assets/(liabilities) 215,148 1.67Total 12,897,027 100.00

iv) Credit rating of quoted bonds

N/A

C) Top Ten Holdings

10 largest holdings as at 31 December 2018

Fair Value(S$)

Percentage oftotal net assetsattributable to

unitholders%

VERIZON COMMUNICATIONS INC 1,279,685 9.92AT&T INC 1,222,628 9.48DEUTSCHE TELEKOM AG 782,793 6.07ALPHABET INC 712,140 5.52ORANGE SA 690,567 5.36CHINA MOBILE LTD 682,114 5.29SOFTBANK GROUP CORP 644,330 5.00BROADCOM INC 623,851 4.84NIPPON TELEGRAPH & TELEPHONE CORP 612,483 4.75T-MOBILE US INC 572,223 4.44


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C) Top Ten Holdings (continued)

10 largest holdings as at 31 December 2017

Fair Value

Percentage oftotal net assetsattributable to

unitholders(S$) %

AT&T INC 2,454,035 15.66VERIZON COMMUNICATIONS INC 2,171,584 13.86VODAFONE GROUP PLC 1,184,699 7.56NIPPON TELEGRAPH & TELEPHONE CORP 968,465 6.18DEUTSCHE TELEKOM AG 821,482 5.24SOFTBANK GROUP CORP 783,072 5.00ALPHABET INC 732,037 4.67ORANGE SA 727,315 4.64COMCAST CORP 717,206 4.58CHINA MOBILE LTD 711,276 4.54

D) Exposure to derivatives

i) Fair value of derivative contracts and as a percentage of NAV as at 31 December 2018

Contract orunderlyingprincipalamount

Positivefair value % of NAV

Negativefair value % of NAV

$ $ $

Foreign currency contracts 8,449 1 -* 3 -*

* denotes amount less than 0.01%

ii) There was a net realised gain of SGD 1,175 on derivative contracts during the financial year ended31 December 2018.

iii) There was a net unrealised loss of SGD 2 on outstanding derivative contracts marked to market asat 31 December 2018.

E) Amount and percentage of NAV invested in other schemes as at 31 December 2018

N/A


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F) Amount and percentage of borrowings to NAV as at 31 December 2018

N/A

G) Amount of redemptions and subscriptions for the financial year ended 31 December 2018

Total amount of redemptions SGD 1,413,044Total amount of subscriptions SGD 51,664

H) The amount and terms of related-party transactions for the financial year ended 31 December2018

Please refer to Note 9 of the Notes to the Financial Statements.

I) Expense ratios


J) Turnover ratios


K) Any material information that will adversely impact the valuation of the scheme such ascontingent liabilities of open contracts

N/A

L) For schemes which invest more than 30% of their deposited property in another scheme, thefollowing key information on the second-mentioned scheme (“the underlying scheme”)1

should be disclosed as well

i) Top 10 holdings at fair value and as percentage of NAV as at 31 December 2018 and 31 December2017

N/A

ii) Expense ratios for the financial year ended 31 December 2018 and 31 December 2017

N/A


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L) For schemes which invest more than 30% of their deposited property in another scheme, thefollowing key information on the second-mentioned scheme (“the underlying scheme”)1

should be disclosed as well (continued)

iii) Turnover ratios for the financial year ended 31 December 2018 and 31 December 2017

N/A

1 Where the underlying scheme is managed by a foreign manager which belongs to the same group of companies as, or hasa formal arrangement or investment agreement with, the Singapore manager, the above information should be disclosed onthe underlying scheme. In other cases, such information on the underlying scheme should be disclosed only if it is readilyavailable to the Singapore manager.

M) Soft dollar commissions/arrangements

UOB Asset Management has entered into soft dollars arrangements with selected brokers fromwhom products and services are received from third parties. The products and services relateessentially to computer hardware and software to the extent that they are used to support theinvestment decision making process, research and advisory services, economic and politicalanalyses, portfolio analyses including performance measurements, market analyses, data andquotation services, all of which are believed to be helpful in the overall discharge of UOB AssetManagement’s duties to clients. As such services generally benefit all of UOB Asset Management’sclients in terms of input into the investment decision making process, the soft credits utilised are notallocated on a specific client basis. The Manager confirms that trades were executed on a bestexecution basis and there was no churning of trades.

N) Where the scheme offers pre-determined payouts, an explanation on the calculation of theactual payouts received by participants and any significant deviation from thepre-determined payouts

N/A


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REPORT OF THE TRUSTEE

The Trustee is under a duty to take into custody and hold the assets of United Global Telecoms Fund (the“Fund”) in trust for the unitholders. In accordance with the Securities and Futures Act (Cap. 289), itssubsidiary legislation and the Code on Collective Investment Schemes, the Trustee shall monitor theactivities of the Manager for compliance with the limitations imposed on the investment and borrowingpowers as set out in the Trust Deed in each annual accounting year and report thereon to unitholders inan annual report.

To the best knowledge of the Trustee, the Manager has, in all material respects, managed the Fundduring the financial year covered by these financial statements, set out on pages 15 to 40, in accordancewith the limitations imposed on the investment and borrowing powers set out in the Trust Deed.

For and on behalf of the TrusteeSTATE STREET TRUST (SG) LIMITED

Authorised signatory22 March 2019


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STATEMENT BY THE MANAGER

In the opinion of UOB Asset Management Ltd, the accompanying financial statements set out on pages15 to 40, comprising the Statement of Total Return, Statement of Financial Position, Statement ofMovements of Unitholders’ Funds, Statement of Portfolio and Notes to the Financial Statements aredrawn up so as to present fairly, in all material respects, the financial position and portfolio holdings ofUnited Global Telecoms Fund (the “Fund”) as at 31 December 2018, and the financial performance andmovements of unitholders’ funds for the year then ended in accordance with the recommendations ofStatement of Recommended Accounting Practice 7 “Reporting Framework for Unit Trusts” issued by theInstitute of Singapore Chartered Accountants. At the date of this statement, there are reasonablegrounds to believe that the Fund will be able to meet its financial obligations as and when they materialise.

For and on behalf of the ManagerUOB ASSET MANAGEMENT LTD

THIO BOON KIATAuthorised signatory22 March 2019


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INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS OF UNITED GLOBAL TELECOMSFUND

Our Opinion

In our opinion, the accompanying financial statements of United Global Telecoms Fund (the “Fund”), areproperly drawn up in accordance with the recommendations of Statement of Recommended AccountingPractice 7 “Reporting Framework for Unit Trusts” issued by the Institute of Singapore CharteredAccountants, so as to present fairly, in all material respects, the financial position and portfolio holdings ofthe Fund as at 31 December 2018, and of the financial performance and movements of unitholders’funds for the financial year ended on that date.

What we have audited

The financial statements of the Fund comprise:

• the Statement of Total Return for the financial year ended 31 December 2018;

• the Statement of Financial Position as at 31 December 2018;

• the Statement of Movements of Unitholders’ Funds for the financial year ended 31 December2018;

• the Statement of Portfolio as at 31 December 2018; and

• the notes to the financial statements, including a summary of significant accounting policies.

Basis for Opinion

We conducted our audit in accordance with Singapore Standards on Auditing (“SSAs”). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Financial Statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Independence

We are independent of the Fund in accordance with the Accounting and Corporate Regulatory AuthorityCode of Professional Conduct and Ethics for Public Accountants and Accounting Entities (“ACRA Code”)together with the ethical requirements that are relevant to our audit of the financial statements inSingapore, and we have fulfilled our other ethical responsibilities in accordance with these requirementsand the ACRA Code.

Other Information

The Fund’s Manager (the “Manager”) is responsible for the other information. The other informationcomprises all sections of the annual report but does not include the financial statements and our auditor’sreport thereon.

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Our opinion on the financial statements does not cover the other information and we do not express anyform of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other informationand, in doing so, consider whether the other information is materially inconsistent with the financialstatements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If,based on the work we have performed, we conclude that there is a material misstatement of this otherinformation, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the Manager for the Financial Statements

The Manager is responsible for the preparation and fair presentation of these financial statements inaccordance with the recommendations of Statement of Recommended Accounting Practice 7“Reporting Framework for Unit Trusts” issued by the Institute of Singapore Chartered Accountants andfor such internal control as the Manager determines is necessary to enable the preparation of financialstatements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Manager is responsible for assessing the Fund’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless the Manager either intends to terminate the Fund or to ceasethe Fund’s operations, or has no realistic alternative but to do so.

The Manager’s responsibilities include overseeing the Fund’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit conducted in accordance with SSAs will always detect a material misstatement when it exists.Misstatements can arise from fraud or error and are considered material if, individually or in theaggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with SSAs, we exercise professional judgement and maintainprofessional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain auditevidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resulting from error,as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the overrideof internal control.

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• Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Fund’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates and related disclosures made by the Manager.

• Conclude on the appropriateness of the Manager’s use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related to eventsor conditions that may cast significant doubt on the Fund’s ability to continue as a going concern.If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’sreport to the related disclosures in the financial statements or, if such disclosures are inadequate,to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date ofour auditor’s report. However, future events or conditions may cause the Fund to cease to continueas a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions andevents in a manner that achieves fair presentation.

We communicate with the Manager regarding, among other matters, the planned scope and timing of theaudit and significant audit findings, including any significant deficiencies in internal control that we identifyduring our audit.

PricewaterhouseCoopers LLPPublic Accountants and Chartered Accountants

Singapore, 22 March 2019

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STATEMENT OF TOTAL RETURN

For the financial year ended 31 December 2018

2018 2017Note $ $

IncomeDividends 567,028 679,065Interest 19 9Total 567,047 679,074

Less: ExpensesManagement fee 9 212,529 252,350Trustee fee 9 5,051 6,112Audit fee 14,000 19,044Registrar fee 9 14,928 15,072Valuation fee 9 17,711 21,029Custody fee 9 8,404 10,451Transaction costs 8,734 30,942Other expenses 26,830 95,635Total 308,187 450,635

Net income/(losses) 258,860 228,439

Net gains/(losses) on value of investments and financialderivativesNet gains/(losses) on investments (1,550,496) (279,380)Net gains/(losses) on financial derivatives 1,173 4,755Net foreign exchange gains/(losses) (2,738) (21,563)

(1,552,061) (296,188)

Total return/(deficit) for the year before income tax (1,293,201) (67,749)Less: Income tax 3 (114,676) (126,856)Total return/(deficit) for the year (1,407,877) (194,605)


The accompanying notes form an integral part of these financial statements.

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STATEMENT OF FINANCIAL POSITION

As at 31 December 2018

2018 2017Note $ $

AssetsPortfolio of investments 12,681,879 15,571,247Receivables 4 72,663 56,700Cash and bank balances 315,546 185,480Financial derivatives at fair value 6 1 -Total assets 13,070,089 15,813,427

LiabilitiesPayables 5 173,059 147,143Financial derivatives at fair value 6 3 -Total liabilities 173,062 147,143

EquityNet assets attributable to unitholders 7 12,897,027 15,666,284



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STATEMENT OF MOVEMENTS OF UNITHOLDERS’ FUNDS


2018 2017Note $ $

Net assets attributable to unitholders at the beginning ofthe financial year 15,666,284 18,176,927

OperationsChange in net assets attributable to unitholders resulting fromoperations (1,407,877) (194,605)

Unitholders’ contributions/(withdrawals)Creation of units 51,664 159,032Cancellation of units (1,413,044) (2,475,070)

Change in net assets attributable to unitholders resulting fromnet creation and cancellation of units (1,361,380) (2,316,038)

Total increase/(decrease) in net assets attributable tounitholders (2,769,257) (2,510,643)

Net assets attributable to unitholders at the end of thefinancial year 7 12,897,027 15,666,284



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STATEMENT OF PORTFOLIO


Holdings at Fair value at

Percentage oftotal net assetsattributable tounitholders at

31 December2018

31 December2018

$

31 December2018

%

By Geography - Primary

Quoted equities

CANADATELUS CORP 9,600 433,630 3.36

FINLANDELISA OYJ 7,000 393,517 3.05

FRANCEORANGE SA 31,311 690,567 5.36

GERMANYDEUTSCHE TELEKOM AG 33,900 782,793 6.07

HONG KONGCHINA MOBILE LTD 52,000 682,114 5.29

INDONESIATELEKOMUNIKASI INDONESIA PERSEROTBK PT 1,175,500 417,822 3.24

JAPANNIPPON TELEGRAPH & TELEPHONE CORP 11,000 612,483 4.75SOFTBANK GROUP CORP 7,100 644,330 5.00

TOTAL JAPAN 1,256,813 9.75

MEXICOAMERICA MOVIL SAB DE CV 10,900 211,708 1.64



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31 December2018

31 December2018

$

31 December2018

%

By Geography - Primary (continued)Quoted equities

NORWAYTELENOR ASA 14,070 370,962 2.88

SINGAPORESINGAPORE TELECOMMUNICATIONS LTD 137,500 402,875 3.12

SPAINTELEFONICA SA 49,100 561,458 4.35

TAIWANFAR EASTONE TELECOMMUNICATIONSCO LTD 73,000 247,315 1.92TAIWAN SEMICONDUCTORMANUFACTURING CO LTD 55,000 549,976 4.26

TOTAL TAIWAN 797,291 6.18

UNITED KINGDOMVODAFONE GROUP PLC 195,860 519,855 4.03

UNITED STATESALPHABET INC 500 712,140 5.52APPLE INC 1,200 257,999 2.00AT&T INC 31,430 1,222,628 9.48BROADCOM INC 1,800 623,851 4.84COMCAST CORP 10,600 491,948 3.81T-MOBILE US INC 6,600 572,223 4.44



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31 December2018

31 December2018

$

31 December2018

%

By Geography - Primary (continued)Quoted equities

UNITED STATES (continued)VERIZON COMMUNICATIONS INC 16,700 1,279,685 9.92

TOTAL UNITED STATES 5,160,474 40.01

Total Equities 12,681,879 98.33

Portfolio of investments 12,681,879 98.33Other net assets/(liabilities) 215,148 1.67Net assets attributable to unitholders 12,897,027 100.00



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Percentage oftotal net assetsattributable tounitholders at31 December

2018%


2017%

By Geography - Primary (Summary)Quoted equities

Canada 3.36 3.10Finland 3.05 2.35France 5.36 6.85Germany 6.07 5.24Hong Kong 5.29 4.54Indonesia 3.24 3.28Japan 9.75 11.18Mexico 1.64 1.60Norway 2.88 2.58Singapore 3.12 3.13Spain 4.35 4.09Taiwan 6.18 1.54United Kingdom 4.03 7.56United States 40.01 42.35Portfolio of investments 98.33 99.39Other net assets/(liabilities) 1.67 0.61Net assets attributable to unitholders 100.00 100.00



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Fair value at31 December

2018$


2018%


2017%

By Industry - SecondaryQuoted equities

Communication Services 11,250,053 87.23 90.14Consumer Discretionary - - 4.58Information Technology 1,431,826 11.10 4.67Portfolio of investments 12,681,879 98.33 99.39Other net assets/(liabilities) 215,148 1.67 0.61Net assets attributable to unitholders 12,897,027 100.00 100.00



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These notes form an integral part of and should be read in conjunction with the accompanying financialstatements.

1 General

United Global Telecoms Fund (the “Fund”) is a Singapore-registered trust fund constituted under a TrustDeed dated 28 June 1999 between UOB Asset Management Ltd (the “Manager”) and HSBC InstitutionalTrust Services (Singapore) Limited (the “Retired Trustee”). The Trust Deed is governed by the laws of theRepublic of Singapore.

With effect from 1 April 2017, the Trustee of the Fund has changed from HSBC Institutional TrustServices (Singapore) Limited to State Street Trust (SG) Limited (the “Trustee”).

The investment objective of the Fund is to achieve long-term capital appreciation by investing mainly insecurities of companies engaged in the development, production or distribution of communicationsservices or communications technology in any part of the world.

Subscriptions and redemptions of the units are denominated in the Singapore Dollar.

2 Significant accounting policies

(a) Basis of preparation

The financial statements have been prepared under the historical cost convention, modified by therevaluation of financial assets held at fair value through profit or loss, and in accordance with therecommendations of Statement of Recommended Accounting Practice 7 “Reporting Framework for UnitTrusts” issued by the Institute of Singapore Chartered Accountants.

(b) Recognition of income

Dividend income is recognised when the right to receive payment is established. Interest income isrecognised on a time proportion basis using the effective interest method.

(c) Investments

Investments are classified as financial assets at fair value through profit or loss.

(i) Initial recognition

Purchases of investments are recognised on the trade date. Investments are recorded at fair value oninitial recognition.


NOTES TO THE FINANCIAL STATEMENTS


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2 Significant accounting policies (continued)

(c) Investments (continued)

(ii) Subsequent measurement

Investments are subsequently carried at fair value. Net changes in fair value on investments are includedin the Statement of Total Return in the year in which they arise.

(iii) Derecognition

Investments are derecognised on the trade date of disposal. The resultant realised gains and losses onthe sale of investments are computed on the basis of the difference between the weighted average costand selling price gross of transaction costs, and are taken up in the Statement of Total Return.

(d) Basis of valuation of investments

The fair value of financial assets and liabilities traded in active markets is based on quoted market pricesat the close of trading on the financial year end date. The quoted market price used for investments heldby the Fund is the last traded market price for both financial assets and financial liabilities where the lasttraded price falls within the bid-ask spread. In circumstances where the last traded price is not within thebid-ask spread, the Manager will determine the point within the bid-ask spread that is most representativeof fair value.

(e) Foreign currency translation

(i) Functional and presentation currency

The Fund’s investors are mainly from Singapore with the subscriptions and redemptions of the unitsdenominated in the Singapore Dollar.

The performance of the Fund is measured and reported to the investors in the Singapore Dollar. TheManager considers the Singapore Dollar as the currency of the primary economic environment in whichthe Fund operate. The financial statements are presented in the Singapore Dollar, which is the Fund’sfunctional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year-end exchange rates of monetary assetsand liabilities denominated in foreign currencies are recognised in the Statement of Total Return.Translation differences on non-monetary financial assets and liabilities are also recognised in theStatement of Total Return within “Net gains/losses on investments”.




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(f) Receivables

Receivables are non-derivative financial assets with fixed or determinable payments that are not quotedin an active market. Receivables are initially recognised at their fair value and subsequently carried atamortised cost using the effective interest method, less accumulated impairment losses.

(g) Sales and purchases awaiting settlement

Sales and purchases awaiting settlement represent receivables for securities sold and payables forsecurities purchased that have been contracted for but not yet settled or delivered on the statement offinancial position date respectively. These amounts are recognised initially at fair value and subsequentlymeasured at amortised cost.

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash at banks and on hand which are subject to an insignificant riskof changes in value.

(i) Payables

Payables are recognised initially at fair value and subsequently stated at amortised cost using theeffective interest method.

(j) Expenses charged to the Fund

All direct expenses relating to the Fund are charged directly to the Statement of Total Return.

(k) Financial derivatives

Financial derivatives including forwards and swaps may be entered into for the purposes of efficientportfolio management, tactical asset allocation or specific hedging of financial assets held as determinedby the Manager and in accordance with the provision of the Trust Deed and the Code on CollectiveInvestment Schemes.

Financial derivatives outstanding on the financial year end date are valued at the forward rate or at thecurrent market prices using the “mark-to-market” method, as applicable, and the resultant gains andlosses are taken up in the Statement of Total Return.




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(l) Distributions

The Manager has the absolute discretion to determine whether a distribution is to be made. In such anevent, an appropriate amount will be transferred to a distribution account, to be paid out on the distributiondate. The amount shall not be treated as part of the property of the Fund. Distributions are accrued forat the financial year end date if the necessary approvals have been obtained and a legal or constructiveobligation has been created.

(m) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the Statement of FinancialPosition when there is a legally enforceable right to offset the recognised amounts and there is anintention to settle on a net basis, or realise the asset and settle the liability simultaneously. The legallyenforceable right must not be contingent on future events and must be enforceable in the normal courseof business and in the event of default, insolvency or bankruptcy of the Fund or the counterparty.

3 Income tax

2018 2017$ $

Overseas income tax 114,676 126,856

The Fund was granted the status of Designated Unit Trust (“DUT”) in Singapore. The Trustee of the Fundensures that the Fund fulfill their reporting obligations under the DUT Scheme.

Under the DUT Scheme, subject to certain conditions and reporting obligations being met, certainincome of the DUT Fund is not taxable in accordance with Sections 35(12) and 35(12A) of the IncomeTax Act. Such income includes:

(i) gains or profits derived from Singapore or elsewhere from the disposal of securities;

(ii) interest (other than interest for which tax has been deducted under Section 45 of the Income TaxAct);

(iii) dividends derived from outside Singapore and received in Singapore;

(iv) gains or profits derived from foreign exchange transactions, transactions in futures contracts,transactions in interest rate or currency forwards, swaps or option contracts and transactions inforwards, swaps or option contracts relating to any securities or financial index;




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3 Income tax (continued)

(v) discount, prepayment fee, redemption premium and break cost from qualifying debt securitiesissued during the prescribed period; and

(vi) distributions from foreign unit trusts derived from outside Singapore and received in Singapore.

The overseas income tax represents tax withheld on foreign sourced income.

4 Receivables

2018 2017$ $

Dividends receivable 32,130 40,287Other receivables 40,533 16,413

72,663 56,700

5 Payables

2018 2017$ $

Amount payable for cancellation of units 89,127 37,292Amount due to the Manager 56,666 65,674Amount due to Trustee 1,288 1,414Tax payables 2,172 1,275Other creditors and accrued expenses 23,806 41,488

173,059 147,143




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6 Fair value of financial derivatives

Financial derivatives contracts comprise foreign currency contracts for the sale and purchase of foreigncurrencies. The contract or underlying principal amounts of these financial derivatives and theircorresponding gross positive or negative fair values at the financial year end date are analysed below.

2018Contract orunderlyingprincipalamount

Positivefair value

Negativefair value

$ $ $

Foreign currency contracts 8,449 1 3

7 Units in issue

During the financial year ended 31 December 2018 and 2017, the numbers of units issued, redeemedand outstanding were as follows:

2018 2017

Units at the beginning of the financial year 16,841,734 19,336,627Units created 59,376 172,204Units cancelled (1,604,522) (2,667,097)Units at the end of the financial year 15,296,588 16,841,734

$ $

Net assets attributable to unitholders 12,897,027 15,666,284Net assets value per unit 0.843 0.930




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7 Units in issue (continued)

A reconciliation of the net assets attributable to unitholders per unit per the financial statements and thenet assets attributable to unitholders per unit for issuing/redeeming units at the financial year end date isprepared below:

2018 2017$ $

Net assets attributable to unitholders per financial statements per unit 0.843 0.930Effect of under recognition of printing fee - 0.001Net assets attributable to unitholders for issuing/redeeming per unit 0.843 0.931

8 Financial risk management

The Fund’s activities expose it to a variety of market risk (including foreign exchange risk, interest rate riskand price risk), credit risk and liquidity risk. The Fund’s overall risk management programme seeks tominimise potential adverse effects on the Fund’s financial performance. The Fund may use futurescontracts, financial options contracts and/or foreign currency contracts subject to the terms of the TrustDeed to moderate certain risk exposures. Specific guidelines on exposures to individual securities andcertain industries are in place for the Fund at any time as part of the overall financial risk management toreduce the Fund’s risk exposures.

The Fund’s assets principally consist of financial instruments such as equity investments and cash. Theyare held in accordance with the published investment policies of the Fund. The allocation of assetsbetween the various types of investments is determined by the Manager to achieve its investmentobjectives.

(a) Market risk

Market risk is the risk of loss arising from uncertainty concerning movements in market prices and rates,including observable variables such as interest rates, credit spreads, exchange rates, and others thatmay be only indirectly observable such as volatilities and correlations. Market risk includes such factorsas changes in economic environment, consumption pattern and investor’s expectation etc. which mayhave significant impact on the value of the investments. The Fund’s investments are substantiallydependent on changes in market prices and are monitored by the Manager on a regular basis so as toassess changes in fundamentals and valuation. Although the Manager makes reasonable efforts in thechoice of investments, events beyond reasonable control of the Manager could affect the prices of theunderlying investments and hence the asset value of the Fund. Guidelines are set to reduce the Fund’srisk exposures to market volatility such as diversifying the portfolio by investing across variousgeographies, alternatively, the Fund may be hedged using derivative strategies.




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8 Financial risk management (continued)

(a) Market risk (continued)

(i) Foreign exchange risk

The Fund has monetary financial assets and liabilities denominated in currencies other than theSingapore Dollar and it may be affected favourably or unfavourably by exchange rate regulations orchanges in the exchange rates between the Singapore Dollar and such other currencies. The Managermay at his discretion, implement a currency management strategy either to reduce currency volatility orto hedge the currency exposures of the Fund.

The table below summarises the Fund’s exposure to foreign currencies at the end of the financial year.

As at 31 December 2018SGD USD GBP EUR JPY Others Total

$ $ $ $ $ $ $

AssetsPortfolio ofinvestments 402,875 5,805,812 519,855 2,428,335 1,256,813 2,268,189 12,681,879Receivables 49,883 2,746 - 14,771 - 5,263 72,663Cash and bankbalances 304,314 11,232 - - - - 315,546Total Assets 757,072 5,819,790 519,855 2,443,106 1,256,813 2,273,452 13,070,088

LiabilitiesPayables 170,887 825 - - - 1,347 173,059Total Liabilities 170,887 825 - - - 1,347 173,059

Net Asset 586,185 5,818,965 519,855 2,443,106 1,256,813 2,272,105Foreign currencycontracts (notionalvalue) 4,549 (4,549) - - - -Net currencyexposure 590,734 5,814,416 519,855 2,443,106 1,256,813 2,272,105




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(i) Foreign exchange risk (continued)

As at 31 December 2017SGD USD GBP EUR JPY Others Total

$ $ $ $ $ $ $

AssetsPortfolio ofinvestments 490,875 7,370,706 1,184,699 2,902,737 1,751,537 1,870,693 15,571,247Receivables 29,888 - - 21,659 - 5,153 56,700Cash and bankbalances 182,361 3,119 - - - - 185,480Total Assets 703,124 7,373,825 1,184,699 2,924,396 1,751,537 1,875,846 15,813,427

LiabilitiesPayables 145,868 - - - - 1,275 147,143Total Liabilities 145,868 - - - - 1,275 147,143

Net currencyexposure 557,256 7,373,825 1,184,699 2,924,396 1,751,537 1,874,571

Investments, which is the significant item in the Statement of Financial Position, is exposed to currencyrisk and other price risk. Other price risk sensitivity analysis includes the impact of currency risk onnon-monetary investments. The Fund’s net financial assets comprise significantly non-monetaryinvestments, hence currency risk sensitivity analysis has not been presented on the remaining financialassets.

(ii) Price risk

Price risk is the risk of potential adverse changes to the value of financial investments because ofchanges in market conditions and volatility in security prices.




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(ii) Price risk (continued)

The table below summarises the impact of increases/decreases from the Fund’s investments in equitieson the Fund’s net assets attributable to unitholders at 31 December 2018 and 2017. The analysis isbased on the assumption that the index components within the benchmark increased/decreased by areasonable possible shift, with all other variables held constant and that the prices of the Fund’sinvestments moved according to the historical correlation with the index.

Benchmark component

2018Net impact to

net assetsattributable to

unitholders

2017Net impact to

net assetsattributable to

unitholders$ % $ %

MSCI ACWI Telecoms 2,435,447 20 2,958,537 20

(iii) Interest rate risk

Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in marketinterest rates. The Fund is not subjected to significant risk due to fluctuations in the prevailing levels ofmarket interest rates.

Investment funds that invest in equity securities may be subject to interest rate risk as any interest ratechange may affect the equity risk premium though at varying degrees. To manage this risk, the Manageranalyses how interest rate changes may affect different industries and securities and then seeks to adjustthe Fund’s portfolio investments accordingly. However, the effects of changes in interest rates in theFund’s portfolio may not be quantified as the relationship between the interest rates and the value ofequity securities is indirect.

Other than the cash and bank balances which are at short term market interest rates, and thereforesubject to insignificant interest rate risk, the Fund’s financial assets and liabilities are largely non-interestbearing.

Hence, no sensitivity analysis has been presented separately.




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(b) Liquidity risk

The Fund is exposed to daily cash redemptions and disbursements for the settlements of purchases. TheManager therefore ensures that the Fund maintains sufficient cash and cash equivalents and that it isable to obtain cash from the sale of investments held to meet its liquidity requirements. Reasonableefforts will be taken to invest in securities which are traded in a relatively active market and which can bereadily disposed of.

The Fund’s investments in listed securities are considered to be readily realisable as they are listed onestablished regional stock exchanges.

The table below analyses the Fund’s financial liabilities into relevant maturity groupings based on theremaining period at the financial year end to the contractual maturity date. The amounts in the table arethe contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances,as the impact of discounting is not significant.

Less than 3months

3 months to1 year

Over1 year

$ $ $

As at 31 December 2018Payables 173,059 - -Financial derivatives at fair value

- Foreign currency contracts 3 - -

Less than 3months

3 months to1 year

Over1 year

$ $ $As at 31 December 2017Payables 147,143 - -

(c) Credit risk

The Fund takes on exposure to credit risk, which is the risk that a counterparty will be unable to payamounts in full when due. The Fund’s credit risk is concentrated on cash and bank balances, andamounts or securities receivable on the sale and purchase of investments respectively. In order tomitigate exposure to credit risk, all transactions in listed securities are settled/paid for upon delivery andtransacted with approved counterparties using an approved list of brokers that are regularly assessedand updated by the Manager.




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(c) Credit risk (continued)

The table below summarises the credit rating of banks and custodians in which the Fund’s assets areheld as at 31 December 2018 and 2017.

The credit ratings are based on the Viability ratings published by Fitch.

Credit ratingas at 31

December2018

Credit ratingas at 31

December2017

Bank and custodianState Street Bank and Trust Company aa- aa-

Counterparty of foreign currency contractsState Street Bank and Trust Company aa- n/a

The maximum exposure to credit risk at the financial year end date is the carrying amount of the portfolio

of investments and cash and bank balances as presented in Statement of Financial Position.

(d) Capital management

The Fund’s capital is represented by the net assets attributable to unitholders. The Fund strives to investthe subscriptions of redeemable participating units in investments that meet the Fund’s investmentobjectives while maintaining sufficient liquidity to meet unitholder redemptions.

(e) Fair value estimation

The Fund classifies fair value measurements using a fair value hierarchy that reflects the significance ofthe inputs used in making the measurements. The fair value hierarchy has the following levels:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1).

• Inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2).

• Inputs for the asset or liability that are not based on observable market data (that is, unobservableinputs) (Level 3).




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(e) Fair value estimation (continued)

The following table analyses within the fair value hierarchy, the Fund’s financial assets and liabilities (byclass) measured at fair value at 31 December 2018 and 2017:

Level 1 Level 2 Level 3 Total$ $ $ $

As at 31 December 2018AssetsPortfolio of investments

- Quoted equities 12,681,879 - - 12,681,879Financial derivatives at fair value - 1 - 1Total 12,681,879 1 - 12,681,880

LiabilitiesFinancial derivatives at fair value - 3 - 3Total - 3 - 3

Level 1 Level 2 Level 3 Total$ $ $ $

As at 31 December 2017AssetsPortfolio of investments

- Quoted equities 15,571,247 - - 15,571,247Total 15,571,247 - - 15,571,247

Investments whose values are based on quoted market prices in active markets, and therefore classifiedwithin Level 1, comprise listed equities. The Fund does not adjust the quoted price for these instruments.

Financial instruments that trade in markets that are not considered to be active but are valued based onquoted market prices, dealer quotations or alternative pricing sources supported by observable inputsare classified within Level 2.

Except for cash and bank balances which are classified as Level 1, the Fund’s assets and liabilities notmeasured at fair value at 31 December 2018 and 2017 have been classified as Level 2. The carryingamounts of these assets and liabilities approximate their fair values as at the financial year end date.




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(f) Offsetting financial assets and financial liabilities

Financial assets and liabilities are offset and the net amount reported in the Statement of FinancialPosition when there is a legally enforceable right to offset the recognised amounts and there is anintention to settle on a net basis or realise the asset and settle the liability simultaneously. The gross andnet positions of financial assets and liabilities that have been offset in the Statement of Financial Positionare disclosed in the first three columns of the tables below.

Financial assets Effects of offsetting on the Statementof Financial Position

Related amount not offset

Grossamounts of

financialassets

Grossamountsset off in

theStatement

ofFinancialPosition

Net amountof

financialassets

presentedin the

Statementof

FinancialPosition

Financialinstruments

Collateralpledged/received Net amount

$ $ $ $ $ $31 December 2018Derivative financialinstruments 1 - 1 (1) - -Total 1 - 1 (1) - -

31 December 2017Derivative financialinstruments - - - - - -Total - - - - - -




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(f) Offsetting financial assets and financial liabilities (continued)

Financial liabilities Effects of offsetting on the Statementof Financial Position

Related amounts not offset

Grossamounts of

financialliabilities

Grossamountsset off in

theStatement

ofFinancialPosition

Net amountof

financialliabilities

presentedin the

Statementof

FinancialPosition

Financialinstruments

Collateralpledged/received Net amount

$ $ $ $ $ $

31 December 2018Derivative financialinstruments 3 - 3 (1) - 2Total 3 - 3 (1) - 2

31 December 2017Derivative financialinstruments - - - - - -Total - - - - - -




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9 Related party transactions

(a) The Manager and the Trustee of the Fund are UOB Asset Management Ltd and State Street Trust(SG) Limited respectively. State Street Trust (SG) Limited replaced HSBC Institutional Trust Services(Singapore) Limited as the Trustee with effect from 1 April 2017. The Manager is a subsidiary of UnitedOverseas Bank Limited while the Trustee is a subsidiary of State Street Bank and Trust Company.

Management fee and valuation fee are paid to the Manager for the financial year. Trustee fee and registrarfee were paid to the Retired Trustee for the period from 1 January 2017 to 31 March 2017.

With effect from 1 April 2017, trustee fee is paid to the Trustee while registrar fee and custody fee are paidto State Street Bank and Trust Company, Singapore Branch.

These fees paid or payable by the Fund shown in the Statement of Total Return and in the respectiveNotes to the Financial Statements are on terms set out in the Trust Deed. All other related partytransactions are shown elsewhere in the financial statements.

(b) As at the end of the financial year, the Fund maintained the following accounts with the relatedparties:

2018 2017$ $

State Street Bank and Trust Company, Singapore BranchCash and bank balances 315,546 185,480




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9 Related party transactions (continued)

(c) The following transactions took place during the financial year between the Fund and related partiesat terms agreed between the parties:

2018 2017$ $

State Street Bank and Trust Company, Singapore BranchBank charges - 1,444Interest income 19 -

United Overseas Bank LimitedBank charges 1,534 50

(d) UOB Kay Hian Pte Ltd is an affiliated company of United Overseas Bank Limited.

During the financial year, the Fund has brokerage fee paid or payable to UOB Kay Hian Pte Ltd as follows:

2018 2017$ $

Brokerage charges - 217




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10 Financial ratios

2018 2017$ $

Total operating expenses 299,453 418,965Average daily net asset value 14,167,606 16,819,954Expense ratio1 2.11% 2.49%

Lower of total value of purchases or sales 1,671,537 4,834,091Average daily net assets value 14,167,606 16,819,954Turnover ratio2 11.80% 28.74%

1 The expense ratio has been computed based on the guidelines laid down by the Investment Management Association ofSingapore (“IMAS”). The calculation of the Fund’s expense ratio at financial year end was based on total operating expensesdivided by the average net asset value respectively for the financial year. The total operating expenses do not include (whereapplicable) brokerage and other transactions costs, performance fee, interest expense, distribution paid out to unitholders, foreignexchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted at source orarising out of income received. The Fund does not pay any performance fee. The average net asset value is based on the dailybalances.

2 The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes.The calculation of the portfolio turnover ratio was based on the lower of the total value of purchases or sales of the underlyinginvestments divided by the average daily net asset value.




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